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MNST Responds to Court Verdict - Analyst Blog

Monster Beverage Corporation
(
MNST
) recently responded to the U.S court's dismissal of its lawsuit
against San Francisco City Attorney Dennis Herrera on Dec 16. The
company claimed that Monster Energy Drinks are safe for
consumption.

Monster Beverage had filed a lawsuit against San Francisco City
Attorney Dennis Herrera to stop the City Attorney from conducting
investigation and statewide litigation against the company for
marketing highly-caffeinated energy drinks to children. The
dismissal of Monster's lawsuit will allow the state to proceed
with the litigation against the company.

According to the City Attorney, pediatric studies indicate that
highly caffeinated energy drinks are harmful for children. The
attorney also claimed that the company needs to change its
marketing strategy as it should not target young children or
athletes.

However, Monster Beverage claimed that the health impact of its
energy drinks can be best judged by the Food and Drug
Administration (FDA). In fact, it is FDA's primary jurisdiction
to check if energy drinks are safe for consumption. Also, the
company stated that the performance enhancing slogans on the
products are justifiable through valid scientific literature and
are not actionable.

Earlier this month, Monster Beverage claimed that leading energy
drinks contain half the amount of caffeine compared to coffee
from companies such as
Starbucks Corporation
(
SBUX
).

Monster Beverage has been facing several legal issues related to
the impact of its energy drinks on consumer health.

We note that, in June, the American Medical Association (AMA)
House of Delegates proposed a ban on marketing of energy drinks.

In Aug 2012, according to The Wall Street Journal, New York's
attorney general initiated a probe to determine whether leading
energy drink makers have misled their consumers about the
ingredients and nutritional value of energy drinks manufactured
by them. The investigation asked for information from three large
companies, namely,
PepsiCo Inc.
(
PEP
), Monster Beverage and Living Essentials LLC. The investigation
was intended to check the amount of caffeine and other artificial
ingredients added to the drinks such as fruit flavors, vitamins
B, taurine and ginseng.

Monster Beverage Corporation carries a Zacks Rank #4
(Sell).
The WhiteWave Foods Company
(
WWAV
) is a better-ranked company in the beverage sector, carrying a
Zacks Rank #2 (Buy).

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